Tuesday, May 12, 2009

Peace Dividend, Capital Convergence

Peace Dividend, Capital Convergence
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
May 12, 2009

Huge Rise! Swift Rise! Wild Rise! Insane Rise! Reckless Rise! The Fourth Chiang/Chen Meeting reached four agreements and one consensus. Increasing stock market momentum then inspired the above headlines.

We have enjoyed an eight-day winning streak. This wave of stock market rises is a response to a changed reality. It also reflects the expectations of society. The phenomenon can be summed up as "peace dividend, capital convergence."

By "response to a changed reality," we mean that investors can see the practical results of the institutionalization of cross-Strait trade and economic interaction. By "expectations of society," we mean that the practical achievements may be less than perfect. But investor psychology has idealized its potential.

In fact, a huge gap remains between real word achievements and society's expectations, Investors refer to this wave of market rises as "market psychology." That means psychological factors have overridden actual market conditions. So the next question is, how can the energy behind this capital be directed into specific investments such as trade? Otherwise, if we remain stuck in speculation, the stock market will remain mere "market psychology." A stock market bubble can pop in the blink of an eye.

The atmosphere of a "peace dividend" has formed. But we talk about dividends, we should first establish what we mean by peace. Only then can we ensure that any dividend does not come to nothing. Peace should mean that cross-Strait relations will be conducted on the basis of the general welfare and rule by the people. It should eschew force and intrigue. This will avoid the dilemma of "who will gobble up whom." It should be a mutually beneficial "What's good for you is good for me, what's good for me is good for you" win/win scenario.

Mainland Affairs Council Chairwoman Lai Shin-yuan said that for cross-Strait exchanges, rhythm is more important than tempo. Actually, for cross-Strait exchanges, melody is even more important than rhythm or tempo. As long as the melody is "peaceful development / win-win," and as long as we keep the public welfare and the rule of the people in mind, the rhythm and tempo will come naturally. Conversely, if we deviate from the theme of "peaceful development/ win-win," the rhythm and tempo are sure to lose synch, resulting in mere noise. In other words, without peace as the melody, any expectation of a dividend will be in vain.

The guiding theme of cross-Strait relations is the "peace dividend." At the operational level it is the "convergence of three forms of capital." The convergence of the three forms of capital creates a virtuous circle. The reality and imagined potential of mainland capital has restored the vitality and power of Taiwan capital. If Taiwan capital and mainland capital are invested in production, they will attract foreign capital. Three forms of capital will then converge. Two conditions are essential. First, the capital must not be "hot money." It must be invested in production, not merely be used to speculate. Second, foreign capital must pass certain benchmark tests. Inflows of foreign capital will prove that Taiwan's economy is showing genuine improvement. Of course this includes Taiwan's ability to successfully sign FTA with other countries.

Overall improvements and upgrades in cross-Strait relations and economic and trade exchanges should create a positive market trend. But some individuals are still opposed, still skeptical, still uneasy. That is because they lack confidence and harbor deep suspicions regarding cross-Strait "peaceful development / win-win." They worry, won't Taiwan will be gobbled up by the mainland? Won't Taiwan become feedstock for Beijing's "procurement policy?"

Such concerns are understandable. But there is no need for excessive pessimism. Beijing has chosen a cross-Strait policy of peaceful development over force. That means it must uphold the general welfare and the rule of the people. The framework for the peaceful development of cross-strait relations must maintain the dignity and defend the interests of the public on Taiwan. Beijing will of course express goodwill by allowing mainland tourists to come to Taiwan to spend money. It is unlikely to imagine that it can "buy" Taiwan by means of mainland capital. In fact Taiwan cannot be be supported by mainland capital alone. Therefore Beijing's policies must hew to the principle of "peaceful development / win-win." They must maintain the dignity of the public on Taiwan. The public on Taiwan must feel that a "peaceful development / win-win" cross-strait policy is trustworthy and worth pursuing.

When improving cross-Strait relations, peace is more important than money. Without genuine peace, any capital will be at political risk. Conversely, the establishment of a theme of "peaceful development / win-win" will surely honor peace, the rule of the people, and the public welfare. With peace as the melody, the rhythm and tempo will follow in due course.

和平紅利 三資匯流
2009.05.12 03:28 am











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